What are the effects of deflation?

Deflation reduces production of goods and services due to reduction in demand for goods and services from the consumers. Reduction in production of goods and services leads to reduced investments, reduction in the salaries of employees, and also increase unemployment. All these leads to massive reduction in the economic growth of the nation. You can read about the Inflation in Economy- Types of Inflation, Inflation Remedies [UPSC Notes] in the given link.

Further readings:

  1. RBI – Know About Reserve Bank of India, Functions, Composition
  2. Monetary Policy Committee (MPC) – An Overview, Instruments of Monetary Policy

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